McCain's people haven't figured this out yet. He is unelectable on Iraq and the economy and those are going to be the decisive issues this time around.
It's a pretty well-accepted phenomenon that candidates pander to the far right/left during the primaries and tend to move more toward the middle in the general. That's why I wasn't surprised to hear McCain's bad Iraq policy and bad economic policy up until he sealed the nomination. But he's been the Republican candidate for a while now and I don't see him moving toward the middle.
But moving toward the middle is not going to be enough of a winning strategy for McCain. He needs to move away from Bush's policies. Far, far, away. Miles away. If the world is a playground and Bush is in the sand box, McCain needs to be headed toward the jungle gym, pronto. This is his only real chance of winning in November.
Over the next month or so you'll see Obama begin to solidify his base and stake his claim to the Clinton voters. Even the ones that said they wouldn't support him will see McCain as an unacceptable alternative. Obama's already been playing the "Bush's third term" card against McCain. McCain deftly countered that Obama would be a second Jimmy Carter term, but the problem with that is that Carter's blunders are not fresh in the minds of every American.
If McCain truly wants to be the president, and not just a lame duck candidate in a year that his party doesn't think they have a chance (a la John Kerry, maybe?), then he's going to have to run against W. He needs to forget about Barack Obama, because this election is about George Bush.
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I agree completely. Its very hard to see how Obama can lose. Even if Iraq is improving as dramatically as the "numbers" suggest, that doesn't change the fact that we've gained nothing by going to war there.
A win is not a win when everybody loses. Republicans haven't figured that out yet.
McCain is wrong on immigration, he was wrong about the war, he's wrong on healthcare.
Healthcare alone is a winning issue for Democrats. Even I have concluded that we cannot continue with a half socialized medical system which is what we have today, and I'm as anti-government as you can get without going all Ted Kazinsky.
Combine healthcare with an absurdly expensive, and apparently pointless, war in Iraq, throw in an unpopular President of historic proportions and you get a man who can attend a black nationalist church, have no workable policies beyond the healthcare position he stole from his chief Democrat rival, no executive or practical experience, and he can still lead in the polls.
Barak has some problems too, of course. He's wrong on immigration as well, he's wrong on affirmative action, he's wrong on liberal judges, and he's wrong on cap and trade. But those aren't negatives because the other candidate has the same positions, as Southern Progression pointed out.
At a minimum then, Obama probably gets Americans nationalized health insurance, which is a huge deal for 90+% of Americans.
I cant vote for the man because of his immigration policies and because he wants to cut spending on the Future Combat Systems program, but other than that, I dont really have any huge problems with his policies, even if I disagree with most of them.
The Republican Party is in serious, serious trouble. I'm glad I'm not one of them, even though because of my Hitler is congruent to Obama post over on Southern Progression, you think I am.
Enjoy your weekend.
McCain has another problem. He continues to alienate his base and marginalize conservatives. Unlike black voters who have supported the Dem party blindly for decades, conservatives won't support a candidate and a party that prefers that they keep quiet and out of the way.
Moderate Republicans have sought since the days of Pat Robertson a way to push conservatives to the side. Well, they got it. Let's see how they like it.
My guess is that many conservatives will stay home and let Obama have the election. If Obama truly is Carter reincarnated, the Dem party will suffer for a long time afterwards. That is if the Republicans have the good sense to capitalize on it. Stupid seems to have been a birth right for Republican leadership for as long as I can remember. Of course that excludes the great Ronaldus Magnus.
No offense to either candidate, but at this point electing a new president will be like changing the captain of the Titanic.
At a minimum then, Obama probably gets Americans nationalized health insurance, which is a huge deal for 90+% of Americans.
First, the universal health care plans proposed by both Obama and Clinton are not nationalized health insurance, no more than car insurance is nationalized. But then again, I doubt that 5% of the supporters realize this.
Second, by the end of summer, universal health care will be clearly an afterthought, replaced by the dreaded specter of stagflation (hence references to the second Carter term). It is kind of frustration, but it seemed that the economy seemed to catch all of the candidates off-guard. While both candidates have moved the economy to the forefront, unfortunately, they're both in "stimulus" mode, trying to prevent a recession; meanwhile, they're both apparently oblivious to the stagflation (and possible deflation) that's been percolating.
The irony is that if the economy is in "manageable" mode, then the fundamentals of the election favor Obama. However, if the economy escalates into SHTF-mode, then McCain may have an advantage. Last week, Gazprom (the largest energy company in the world) predicted $250 oil; at that price, the issue is no longer domestic, rather geopolitical, heavily favoring McCain. In either case, the first candidate to create a narrative, rather than just reciting talking points, will likely win over the moderates.
I'll concede the point on health care, although it is the equivalent of a nationalized system for tens of millions of Americans (lower middle-class Americans).
Exxon-Mobile market cap: 460 billion
Gazprom market cap: 340 billion
Gazprom = state controlled Russian energy conglomerate generating 20% of the world's total natural gas production. Supplies 25% of Europe's natural gas. Although the company controls respectable volumes of proven oil reserves, its primary business is, and will remain, natural gas.
Do you think this state-managed outfit might be interested in provoking a continued spike in oil prices?
As for the rest of your observations I'll say this: corporate earnings are sound, the S&P is showing remarkable potency in the face of an avalanche of hysterics of the sort typified by your post. Core-inflation is well-heeled at this point and productivity remains at astronomically high levels.
The fundamentals are perfectly sound at this point. The spike in energy prices is sketchy, even alarming, but overall, the center will hold and in another two years no one will think twice about 4 dollar gasoline. That's how American works, that's why America works. We are the best country in the world because we adapt faster than anyone else. Change and adaptation is what our system is designed to exploit.
In my opinion, stagflation (and certainly not deflation) threatens the economy. If I thought it would, I would be scrounging a few dollars to offset the prediction by selling bond contracts, because stagflation would wreck the bondholders and the United States government will be forced to do literally anything in its power to prevent a wipe out of the US debt markets. That is simply an unthinkable scenario.
If it gets to that point, I agree with you that it becomes geopolitical at that point. But remember, we've got a perfectly capable army sitting in the Middle East. If it came to simply taking over the oil, the United States is in a position to do it.
Maybe the Iranians will get their chance to shut down the straights, but I suspect if it comes to that, the Iranians will not succeed.
Of course, none of that will happen. We're going to ride this out for six months, end up with another lame President, and we'll all be back to business as usual, doing what Americans do best: getting rich.
I'm aware the GazProm is nationally owned, just like I'm aware that the current Russian president Medvedev was its former Chairman. In a way, the $250 price target was simply the modern form of saber-rattling; scare the crap out of everyone and build international influence. The irony with Gazprom is that Europe, and soon the US, with it's insistence on cap-and-trade is fueling is growth; it's easier to switch from coal to natural gas for energy than to build nuclear power plants.
Stagflation is clearly a threat, and reliance on understated core inflation, ex food and energy, is misguided. In it's earliest incarnation, core was supposed to smooth out supply shocks like a hurricane wiping out the citrus crops. We're beyond the point of random supply shocks, and no one except the government is taking core-inflation seriously.
Deflation can come in a couple ways; usually it's manifested in lower prices, but not necessarily. However, it can also occur from a contraction in the money supply. Between the massive deleveraging of the IBs, and the 50% decrease in housing prices, the possibility of deflation is real.
But the most serious problem that will face the new president may simply be the dollar. We simply can't continue to monetize both our financial crises and twin deficits without expecting the OPEC/China, who own most of our notes, to get pissed when their reserves take a 20% dive. This chart says it all:
http://www.econbrowser.com/archives/2008/06/oilp_oc.gif
SunnyD, there isn't anything China can do about the relative purchasing power of their treasury positions. If they start dumping bonds, they are cutting their own throats, and they know it. They know they wont do it, and we know they wont do it, so who cares and what difference does it make whether they are pissed or not?
The same goes for OPEC. Every OPEC nation knows that they only have one foot out of the third world. Taking money from third world fools is the United States' specialty. Translation: if OPEC stops selling, we'll start drilling and converting, which is an effective death sentence to every OPEC member.
None of these nations have anywhere to go. If they start buying Euros, they dont help themselves. The United States and Europe are in lock step, economically, even if their currencies aren't.
In short, the West holds all the cards. The rest of the world depends on our markets, our technology, our institutions, and especially our military power for economic stability.
Energy is spiking. So what? In two years the United States and Europe will have adapted, and all those shiny new factories in China, if things continue, will be empty.
Did people really think that China was going to continue 10% year over year growth? Talk about a bubble.
If they start dumping bonds, they are cutting their own throats, and they know it. They know they wont do it, and we know they wont do it, so who cares and what difference does it make whether they are pissed or not?
Actually, a lot of people are dumping US bonds; check out the yields since the Bear Stearns collapse (3/18/08).
http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield_historical.shtml
The concern is not that the Chinese and OPEC are going to get pissed and throw a temper tantrum; the problem is that neither OPEC nor China are relaxing their dollar pegs, and therefore not allowing the trade deficits to correct. You've got to wonder why both China and the Gulf States are submitting themselves to double digit inflation domestically, and the concomitant unrest, by maintaining the dollar peg? Furthermore, by sterilizing the yuan (having trillions in USD allows this), China has done a pretty damn good job of not allowing energy costs to inflate the value of their exports.
In short, the West holds all the cards. The rest of the world depends on our markets, our technology, our institutions, and especially our military power for economic stability.
I'll agree with this with a caveat: the US needs instability in the Middle East. However, it's no coincidence that recently, many of the Gulf States have entered into state contracts for food as a means of self-sufficiency.
None of these nations have anywhere to go. If they start buying Euros, they dont help themselves. The United States and Europe are in lock step, economically, even if their currencies aren't.
I strongly disagree with this point. Many of the Eurozone countries have positive current account balances; hell, Germany is the world's largest exporter. Meanwhile, the three industrialized countries that are experiencing the greatest financial shocks (US,UK,Spain) just happen to have the worst current account balances.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html
The situation doesn't affect me personally; I've seen this coming for a while and have been long on energy and short the dollar for some time now. The problem is really for the 90% of individuals and businesses who are leveraged to the hilt; as the US continues to monetize the twin deficits, along with the subprime (and soon to be option-ARM) mess, is Joe SixPack ready for further dollar destruction? My guess is no, and there is going to be quite a shock. As we've seen already, neither Detroit nor the airlines were knew what hit them...
As an aside: Once Detroit and the airlines declare bankruptcy (which they most certainly will), Uncle Sam is on the hook for ~$200B in pension benefits guarantees.
But back to my original point, the economic landscape is starting to look like SHTF-mode; front and center this week was $4 gasoline and the energy crisis. Regardless of the substantive merits of his plan, I believe that McCain's re-categorization of the energy debate from an environmental issue to one of national security will pay dividends, especially by allowing him to get around his previous ANWR stance.
Wrapping this all up, there are two dates to watch: 6/20 and 8/5. I'll keep you guys guessing.
"Actually, a lot of people are dumping US bonds; check out the yields since the Bear Stearns collapse (3/18/08)."
That activity reflects the market's sense that the FOMC is in a tightening stance.
You are implying that OPEC and China are going to stop buying US Treasuries, which I disagree with. If there was any indication of that, yields would be spiking dramatically. Further evidence of business as usual is the 25 basis point spread between TIPS and Notes.
China isn't pegged to the dollar.
Not all of OPEC is pegged at the dollar, only the really pathetic client states like the Saudis and the UAE.
China doesn't have trillions of dollars. On balance, they've got around a trillion.
"You've got to wonder why both China and the Gulf States are submitting themselves to double digit inflation domestically, and the concomitant unrest, by maintaining the dollar peg?"
The answer is what my post is all about. Do you really think that autocracies are stupid enough to invest to the benefit of their own people?
Germany is in great shape, despite 4.5 trillion external debt. And Japan is a mess, despite the most productive workers and the largest account balance in the First World.
The businesses and individuals that are leveraged to the hilt deserve what's coming to them.
As for being short the dollar and long energy, you are playing with fire right in those positions. If you bet against the dollar, you are betting against civilization- that's never been a very good bet. And long energy at current levels is risky as hell. People are talking openly of cutting back on driving time. I'd be very surprised if we didn't see a deep retrenchment of the price / bl.
It's good to hear you are making scratch though. I always like to hear people using the system the way God intended instead of complaining all the time about how manipulative they are.
People are sheep. And sheep get slaughtered. It doesn't sound like you're one of them.
Cheers.
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